Canada, France, Germany, Japan, United Kingdom, United States

1. Ministers of Finance and Central Bank Governors of six major
industrialized countries met today in Paris to conduct
multilateral surveillance of their economies in the framework of
the Tokyo Economic Declaration of May 6, 1986 pursuant to which
the group of seven Finance Ministers was formed.
The Ministers and Governors, using a range of economic
indicators,reviewed current economic developments and prospects.
The Managing Director of the IMF participated in the discussions.

2. The Ministers and Governors were of the view that further
progress had been made since the Tokyo Summit in their efforts to
achieve a sustainable, non-inflationary expansion. Their national
economies are now in the fifth year of expansion, and the
prospects are for continued growth this year, although the level
of unemployment remains unacceptably high in some countries.
A high degree of price stability has been attained, and there
have been substantial reductions in interest rates. Exchange rare
adjustments have occurred which will contribute importantly in
the period ahead to the restoration
of a more sustainable pattern of current accounts.

3. Progress is being made in reducing budget deficits in
deficit countries, and fundamental tax reforms are being
introduced to improve incentives,
increase the efficiency of economies, and enhance the prospects
of higher growth. Other important structural reforms are also
being carried forward, including deregulation of business to
increase efficiency and privatization
of government enterprises to strengthen reliance on private
entrepreneurs and market forces.

4. These positive developments notwithstanding, the Ministers
and Governors recognize that the large trade and current account
imbalances of some countries pose serious economic and political
risks. They agreed that the reduction
of the large unsustainable trade imbalances is a matter of high
priority, and that the achievement of more balanced global growth
should play a central role in bringing about such a reduction.

5. The Ministers and Governors reaffirmed their concern over
continuing pressures for protectionism. They agreed that efforts
to deal with economic problems by erecting trade barriers were
self-defeating and pledged to intensify their efforts to resist
protectionism and reaffirmed their strong support
for the new round of trade negotiations. They welcomed the
progress made in the preparatory work for the new GATT round and
the recent positive conclusions of discussions between the United
States and the European Community on bilateral trade issues.

6. The Ministers and Governors recognized that the major
industrial countries have a special responsibility to follow
policies which foster an open, growing world economy in order to
support the efforts of developing countries, especially debtor
countries, to restore steady growth and viable
balance of payments positions. They noted that the progress
achieved by many debtor countries toward these ends have not
solved all the problems and stressed the importance of all
participants in the strengthened debt strategy reinforcing their
cooperative efforts.

7. The Ministers and Governors agreed to intensify their
economic policy coordination efforts in order to promote more
balanced global growth and to reduce existing imbalances. Surplus
countries committed themselves to follow policies designed to
strengthen domestic demand and to reduce their
external surpluses while maintaining price stability. Deficit
countries committed themselves to follow policies designed to
encourage steady, low-inflation growth while reducing their
domestic imbalances and external deficits.
To this end, each country has agreed to the following
undertakings.

The Government of Canada's policy is designed to sustain
the current economic expansion through its fifth year and beyond.
In the budget for 1987/88, the Government has cut the fiscal
deficit for the third consecutive year and remains committed to
further progressive reduction. Canada will propose shortly an
extensive reform of its tax system. It will continue
with its policies of regulatory reform, privatization and
liberalization of domestic markets. It will vigorously pursue
trade liberalization bilaterally
with the United States and multilaterally within the Uruguay
round. Monetary policies will continue to aim at the reduction of
inflation and be consistent with orderly exchange markets.

The Government of France will reduce the central
government budget deficit by 1 percent of GNP from 1986 to 1988
and in the same period will implement a tax cut program of the
same order of magnitude (1 percent of GNP) with substantial tax
rate cuts for corporations and individuals. It
will pursue in 1987 its privatization program (with a projected
$6 to $7 billions sale of assets) and reinforce the
liberalization of the French economy, especially of labor and
financial markets.

The Government of the Federal Republic of Germany will
pursue policies to diminish further the share of public
expenditures in the economy and to reduce the tax burden for
individuals and corporations with a comprehensive tax reform
aimed at reinforcing the incentives for private sector activity
and investment. In addition, the Government will propose to
increase the size of the tax reductions already enacted for 1988.
The Federal Government will emphasize policies that enhance
market forces in order to foster structural
adjustment and innovation. Short-term interest rates, although
already at a very low level in international comparison, have
further dropped substantially during the last few weeks. Monetary
policy will be directed at improving the conditions for sustained
economic growth while maintaining price stability.

The Government of Japan will follow monetary and fiscal
policies which will help to expand domestic demand and thereby
contribute to reducing the external surplus. The comprehensive
tax reform, now before the Diet, will give additional stimulus to
the vitality of the Japanese economy.
Every effort will be made to get the 1987 budget approved by the
Diet so that its early implementation be ensured. A comprehensive
economic program
will be prepared after the approval of the 1987 budget by the
Diet, so
as to stimulate domestic demand, with the prevailing economic
situation
duly taken into account. The Bank of Japan announced that it will
reduce
its discount rate by one half percent on February 23.

The United Kingdom Government will maintain conditions
for continuing
the steady growth of GDP of the past five years and will continue
to work
to reduce inflation by following a prudent monetary policy. On
external
account the aim will be broad balance over the medium term. The
share of
public expenditure in the economy will continue to fall and the
burden
of taxation will be reduced, while public sector borrowing is
maintained
at low level. These and other measures to strengthen the supply
performance
of the economy, such as the privatization programme, will
reinforce improvement
over recent years in the growth of productivity.

The United States Government will pursue policies with
a view
to reducing the fiscal 1988 deficit to 2.3 % of GNP from its
estimated
level of 3.9 % in fiscal 1987. For this purpose, the growth in
government
expenditures will be held to less than 1 percent in fiscal 1988
as part
of the continuing program to reduce the share of government in
GNP from
its current level of 23 percent. The United States will introduce
a wide
range of policies to improve its competitiveness and to enhance
the strength
and flexibility of its economy. Monetary policy will be
consistent with
economic expansion at a sustainable non-inflationary pace.

8. The Ministers and Governors noted that a number of newly
industrialized
economies were playing an increasingly important role in world
trade. These
economies have achieved strong growth based significantly on
their access
to open, growing export markets. Recently, some have accumulated
trade surpluses
which have contributed importantly to the present unsustainable
pattern
of global imbalances,thus increasing protectionist pressures. The
Ministers
and Governors considered that it is important that the newly
industrialized
developing economies should assume greater responsibility for
preserving
an open world trading system by reducing trade barriers and
pursuing policies
that allow their currencies to reflect more fully underlying
economic fundamentals.

9. The Ministers and Governors also agreed to additional
refinements
in the use of economic indicators for the multilateral
surveillance arrangements
approved in the Tokyo Economic Declaration. As part of these
refinements,
they will:

periodically review medium-term economic objectives and
projections
involving domestic and external variables. The medium-term
objectives and
projections are to be mutually consistent and will serve as a
basis for
assessing national policies and performance;

regularly examine, using performance indicators, whether
current economic
developments and trends are consistent with the medium-term
objectives
and projections and consider the need for remedial action.

10. The Ministers and Governors agreed that the substantial
exchange
rate changes since the Plaza Agreement will increasingly
contribute to
reducing external imbalances and have now brought their
currencies within
ranges broadly consistent with underlying economic fundamentals,
given
the policy commitments summarized in this statement. Further
substantial
exchange rate shifts among their currencies could damage growth
and adjustment prospects in their countries. In current
circumstances,
therefore, they agreed to cooperate closely to foster stability
of exchange
rates around current levels.